Producer prices mostly rose in November, but decline continues in agriculture
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Producer prices surprised with generally weaker growth in November, across the categories monitored. Industrial producer prices fell by 0.4 % m-o-m, while the market had expected a smaller decline (-0.2 %), agricultural producer prices - especially crop production - corrected markedly after a surprising rise in October, and business services prices also recorded a slight m-o-m decline above normal seasonality.
Prices for construction work rose slightly, but at a slower pace than was consistent with November in previous years. For Thursday's CNB monetary policy meeting, today's numbers provide supporting arguments for the board to have already begun to cut interest rates slightly.Industrial producer prices fell 0.4 % mom in November, while the analyst consensus expected a 0.2 % decline. The year-on-year rate then accelerated slightly from 0.2 % yoy to 0.8 % (expectations +1 % yoy, Chart 1). Roughly half of the month-on-month decline was driven by prices of coke and refined petroleum products, but a slight negative contribution was recorded in most manufacturing sectors, with price increases concentrated in only a few categories such as beverages, computers and electronics. Food producer prices fell for the 9th consecutive month. On a year-on-year basis, prices rose slightly, but this was largely due to the benchmark base effect and a smaller negative contribution from the coke and refined petroleum products category compared with October.
Agricultural producer prices corrected the very strong month-on-month increase in crop prices from October, so that they fell by almost 8 % in November and agricultural producer prices fell by almost 5 % after a 4 % increase in October (see Chart 2). In year-on-year terms, the fall in agricultural producer prices thus intensified and continued at a double-digit pace (Graph 1b, Graph 3).
Construction prices rose marginally month-on-month (0.1 %), but this is a smaller increase than that seen in November in previous years. The year-on-year rate then slowed from 3.6 % to 3.3 %. Prices of construction materials have been falling for 8 months in a row and in annual terms for the last three months (-0.5 % yoy, Chart 4).
Prices of business services fell by 0.2 %, with annual growth rising slightly from 5.3 % to 5 %. In previous years, prices have tended to stagnate in November, so prices in this category have also been more favourable. In particular, employment services or programming and consultancy services saw a fall in prices, while prices for financial services rose faster.
Overall, however, the November figures, after the mixed tone of the October figures, once again confirm the continuing disinflationary trend in a number of categories of prices for businesses and will then serve as further arguments at Thursday's CNB meeting as to why the central bank may already have started to cut interest rates slightly. In our view, this is a higher probability scenario and we thus expect a quarter percentage point cut in the base rate on Thursday.
Prices for construction work rose slightly, but at a slower pace than was consistent with November in previous years. For Thursday's CNB monetary policy meeting, today's numbers provide supporting arguments for the board to have already begun to cut interest rates slightly.Industrial producer prices fell 0.4 % mom in November, while the analyst consensus expected a 0.2 % decline. The year-on-year rate then accelerated slightly from 0.2 % yoy to 0.8 % (expectations +1 % yoy, Chart 1). Roughly half of the month-on-month decline was driven by prices of coke and refined petroleum products, but a slight negative contribution was recorded in most manufacturing sectors, with price increases concentrated in only a few categories such as beverages, computers and electronics. Food producer prices fell for the 9th consecutive month. On a year-on-year basis, prices rose slightly, but this was largely due to the benchmark base effect and a smaller negative contribution from the coke and refined petroleum products category compared with October.
Agricultural producer prices corrected the very strong month-on-month increase in crop prices from October, so that they fell by almost 8 % in November and agricultural producer prices fell by almost 5 % after a 4 % increase in October (see Chart 2). In year-on-year terms, the fall in agricultural producer prices thus intensified and continued at a double-digit pace (Graph 1b, Graph 3).
Construction prices rose marginally month-on-month (0.1 %), but this is a smaller increase than that seen in November in previous years. The year-on-year rate then slowed from 3.6 % to 3.3 %. Prices of construction materials have been falling for 8 months in a row and in annual terms for the last three months (-0.5 % yoy, Chart 4).
Prices of business services fell by 0.2 %, with annual growth rising slightly from 5.3 % to 5 %. In previous years, prices have tended to stagnate in November, so prices in this category have also been more favourable. In particular, employment services or programming and consultancy services saw a fall in prices, while prices for financial services rose faster.
Overall, however, the November figures, after the mixed tone of the October figures, once again confirm the continuing disinflationary trend in a number of categories of prices for businesses and will then serve as further arguments at Thursday's CNB meeting as to why the central bank may already have started to cut interest rates slightly. In our view, this is a higher probability scenario and we thus expect a quarter percentage point cut in the base rate on Thursday.
Disclaimer: Text translated automatically, excuse any imperfections.